CNX Resources Corporation
Q1 2016 Earnings Call Transcript

Published: 26 Apr 2016

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to CONSOL Energy's First Quarter 2016 Earnings Conference Call. As a reminder, today's call is being recorded. I would now like to turn the conference call over to the Vice President of Investor Relations, Mr. Tyler Lewis. Please go ahead.

[Tyler Lewis:]

Thanks, John, and good morning to everybody. Welcome to CONSOL Energy's First Quarter Conference Call. We have in the room today Nick DeIuliis, our President and CEO; Dave Khani, our Chief Financial Officer; and Tim Dugan, our Chief Operating Officer of our E&P division. Today, we'll be discussing our first quarter results and we've posted slides through our website. As a reminder, any forward-looking statements we make or comments about future expectations are subject to business risk which we've laid out for you in our press release today, as well as in previous Securities and Exchange Commission filings. We will begin our call today with prepared remarks by Nick, followed by Dave and then Tim. But before I turn it over to Nick, I would like to quickly go over some housekeeping items regarding some changes that we have made this quarter. To start, we have posted two slide decks through our Investor Relations portion of our website. The first presentation is a smaller earnings call slide deck, which is meant to tie to our prepared remarks this morning. The second slide deck is our broader company presentation which has more slides and information beyond the scope of what we might be covering on this call. Also, CONSOL is moved to provide more disclosure in the EBITDA reconciliation table which is found at today's press release. We are now providing an EBITDA reconciliation for the quarter across the E&P division, coal division, other segment and total company. The other segment represents expenses from various other corporate activities that are not allocated to the E&P or coal divisions. These items would include things such as pension expense, bank fees, interest expense and income taxes. Also starting this quarter, CONSOL Energy has made certain adjustments to the financial statements to reflect the sale of the Buchanan Mine which is now reflected under discontinued operations. In addition, CONSOL Energy has also made the following reclassifications to the income statement. We have removed the direct administrative and selling expense line item from both the E&P and coal division segments. For E&P, that expense is now being reallocated across the lease operating expense in general and administrative expense line items. For the coal division, direct administrative and selling is now being reallocated across the operating and other costs in general and administrative expense line items. Also, for the E&P division, production royalty interest which was previously shown on a gross basis is now being netted together and deducted from the transportation, gathering and compression expense line item. These accounting changes reflect more common industry practices to better help analyze the company. To reflect these changes, CONSOL Energy has recast historic income statements that can be found on the CONSOL Energy website through following the link provided in the press release this morning. Finally, starting this quarter, CONSOL has changed its coal division guidance methodology. Nick will provide more color on the reasoning behind these changes but it's important to note that we have moved towards now providing CONSOL Energy's pro rata coal division adjusted EBITDA guidance for full year 2016. This guidance is meant to provide more transparency by reconciling the adjusted EBITDA guidance at our subsidiary, CNX Coal Resources LP, provides to our pro rata total coal division. With that, let me turn the call over to you, Nick.

[Nicholas J. DeIuliis:]

Thanks, Tyler, and good morning, everybody. I want to start things off by briefly talking through some of the changes that we've implemented this quarter, when you look at our corporate structure and how we intend to communicate information moving forward. So, specifically, the organizational changes are a result of the recent sale of the Buchanan Mine, which we view is a watershed event in terms of the separation of our businesses and the acceleration of our evolution into a pure play E&P. So, as a result, CONSOL has undertaken a number of reorganization initiatives, which we initially highlighted in our press release back on, I believe, April 7 this year. In that release, we talked about our subsidiary, CNX Coal Resources or CNXC, undertaking more the responsibilities associated with the Pennsylvania coal complex to include managing all kinds of different aspects of the corporate functions from human resources to land, marketing, external communications and other administrative commercial type functions as it relates to the Pennsylvania coal mining operations. Now we've tailored CONSOL's earnings press release accordingly and have shifted towards adopting full year 2016 coal division EBITDA guidance, and that's going to be built off of the EBITDA guidance that CNXC provides. So, since CONSOL is now an E&P company with essentially one remaining coal complex which CNXC operates and E&P division now comprises over 70%, I think around 71% of CONSOL's adjusted EBITDA as of this quarter, we feel the shift is a natural next step. We also believe that providing coal division EBITDA guidance is the best means to be the most transparent. We of course are going to answer questions that relate to CONSOL's business. However, we do not intend to discuss the Pennsylvania operations like we have in the past. Again, it's our intent to allow the operators of that complex, CNXC, which is now responsible for all aspects of the business, to discuss those operations into more detail, which they did in part yesterday at close of market on their first quarter earnings release and call. Shifting now to some of the highlights from the quarter. We remain focused, and really the key word probably to – with focus is tenaciously, so tenaciously focused on our strategy over the past couple of months and during the first quarter. Specifically, we generated free cash flow of $449 million, which included $35 million in organic free cash flow, which we're defining as cash flow from operations less CapEx. In addition to generating organic free cash flow, as mentioned earlier, CONSOL sold our premier metallurgical Buchanan coal mine for $460 million. That equates to somewhere between an 18 and 23 multiple premium, when you look at expected 2016 EBITDA contribution from Buchanan of around $20 million to $25 million. So we're obviously very happy with the transaction. It helps accomplish many important goals including bringing forward substantial value while providing upside to capture potential increases in met pricing over the next five years through the earn-out provision which we provided some detail on. Also, the sale of Buchanan brings CONSOL one step closer to completing our pure play strategy as all the company's remaining met assets were included in the sale transaction. So, any way you cut it, this is a huge win for CONSOL. However, it's also a win for the buyer who's going to benefit from this premier mine becoming a flagship operation while they inherit Buchanan's industry-leading workforce. So we wish them all the best. And also during the quarter, our $2 billion borrowing base, that was reaffirmed by our lenders. We announced also three new nominations to our board of directors, so a lot of accomplishments and a lot have change to our evolution as we're rapidly moving towards a pure play E&P. I'd like to wrap up the remarks by reiterating CONSOL's continued focus, which is controlling the areas that remain within our control. The commodity environment remains challenging, although many indications are starting to point towards a recovery. That said, we will continue to focus on the elements of the business that we can control. And those are things like safety, environmental compliance, unit costs, capital discipline, capital efficiencies and also gas hedging. So we haven't let off the pedal in any one of these areas. It's been quite the opposite. Our safety record speaks for itself. Our environmental compliance record is industry-leading. And you can see that by our corporate responsibility reports, and many of the environmental initiatives that we undertake are beyond industry or regulatory requirements. We believe these initiatives set us apart and truly distinguish us from our peers. The quarter also highlighted another stellar performance when you look at E&P unit cash costs of $1.33 per Mcf. These total cash unit costs are already below the low end of our 2016 guidance. We're starting to see the dry Utica Shale play into the mix and help further lower cost. And we expect the exciting play to become a much bigger part of our future development program. Now, as for our gas hedging program, we layered in a substantial amount of hedges in the out-years. By layering in these hedges, we're able to lock in our revenue margins and protect potential downside risk in order to support our free cash flow plan. Now, being a low cost E&P producer, that's enabled CONSOL to layer on these additional hedges, continuing to put the company in a position of strength. Not only do we have reduced downside risk by layering in hedges, but we also benefit from potential upside in natural gas pricing through multiple areas of exposure. And when you think of those multiple areas of exposure, they include things like open volumes beyond what's hedged. They include any potential incremental production growth that we target. They're also going to include thermal coal pricing exposure as natural gas prices rise, and there are also potential additive benefits such as recouping our outstanding carry within our Marcellus JV as well as seeing increased asset valuations and demand for those assets in our monetization efforts. So the bottom line is that we protected our downside while positioning the company to benefit from potential upside when it comes. By focusing on the areas that are within our control, we're able to become more decisive in order to drive results. And similar to what we discussed last quarter, we continue to benefit from a position of strength where we don't need to sell assets. However, it's important to understand, our monetization program still remains part of the business and we've been proven in the past that we're willing and ready to pull the trigger on selling assets if it means that it's going to be accretive to our NAV per share. Similar to how we have treated the most recent asset sales announced over the past six months, which by the way have equated around $550 million of cash proceeds, we do not intend to provide guidance on any potential asset sales. So it's more of a stay tuned and see how things unfold. Last, I'd like to provide just a little color as to what we see in the future as a result of the organizational changes we've made and because of the strategic moves we've been able to execute. Now while macro challenges certainly remain, our overall corporate strategies gain significant momentum. The team's very excited about what lies ahead with over a million net acres between the Marcellus and Utica, CONSOL's and Appalachian-focused E&P company, with what believe is the largest acreage footprint and the lowest cost basin in the United States. Our intent is pretty straightforward. We want to be the low cost producer and the lowest cost basin in the United States. And if you're in the commodity business like we are, that's as good as it gets. With the remarkable operational efficiencies, we continue to achieve and with the superior acreage position we hold, there's no ceiling on our potential. We also have a vehicle in CNXC which operates the best thermal coal mine in the world, one that continues to not only survive but thrive in the midst with the rest of the industry literally crumbling around it. CONSOL Energy's poised to break out and break out in a big way. And with that, I'm going to turn things over to Dave Khani.

[David Michael Khani:]

Thanks, Nick, and good morning, everyone. My comments will tie to several slides within the updated slide deck which was posted to our IR site under Presentations to Analysts. As highlighted in our press release this morning and indicated on slide three, CONSOL reported first quarter 2016 GAAP net loss of $98 million. However, there are several adjustments totaling $82 million in the quarter. First, we had a mark-to-market loss on our unrealized hedges of $29 million tying to the recent rise in natural gas prices. Our positive hedge book now stands at $222 million at the end of the quarter. Second, we had loss on asset sales including Buchanan of $46 million. And third, we had some severance expense. After normalizing for this and looking at continuing operations, we posted a modest loss of $16 million or $0.07 per share and adjusted EBITDA of $176 million. This is slightly better than consensus and was driven primarily from our E&P division which was more than offset – which more than offset lower coal margins at CNXC. With the sharp rise in E&P – I'm sorry, the sharp reduction in E&P, coal and corporate costs, as well as lower capital intensity, we have positioned the company to be able to weather a very low commodity price environment. U.S. heating degree days were 8% below normal for the first quarter of 2016 but our region was about 17% below normal, causing spot commodity prices to decline to their lowest point since 2003. If you move at slide four, more importantly, we have generated positive free cash flow of $449 million including $35 million of organic free cash flow which we define as net cash provided by continuing operations, less capital expenditures and net investment in equity affiliates. Over the next nine months, we expect to continue to generate organic free cash flow based on our strong hedge book, rising production, front end loaded CapEx, and using the forward curve on our open volumes. If you look at all three of our areas E&P, CONE and CNX Coal Resources, each will generate free cash flow in 2016. Now let me also point out that our CONE Midstream Partners which will report earnings on May 5 just declared a 15% distribution increase and is starting to hit the second IDR split with this increase. Within CONSOL's financials, CONE is accounted for under the equity method of accounting and is becoming a bigger and significant cash flow contributor of CONSOL. Now let's look at our met sale on slide five. As Nick highlighted and had stated in our press release, CONSOL sold the Buchanan Mine for $460 million deal value. This included $425 million in cash, of which, $403 million was received at the closing with $22 million of cash being held under – in a two-year escrow account. Also, CONSOL will receive a $23 million in net accounts receivable/payables following the close of this transaction, and the buyer assumes also $12 million of associate legacy liabilities. Nick also mentioned the upside in commodity prices if met prices rise. Last night, CNX Coal Resources reported their first quarter earnings release. We refer you to listen to the replay and to hear their commentary and to follow-up with Mitesh Thakkar for PA accomplished (14

[Timothy C. Dugan:]

Thanks, Dave, and good morning, everyone. In the first quarter, CONSOL continued to build on the positive momentum in our E&P operations, with strong operational execution driving production growth, while low operating costs support the E&P division's ability to generate free cash flow in 2016 despite the adverse commodity price environment. E&P production grew to 97.5 billion cubic feet of natural gas equivalent, a 36% increase over the same period last year and a 2% improvement from the fourth quarter. The growth was driven by continued strong production performance from our Southwest PA Marcellus wells, continued production contributions from Midstream debottlenecking, turn in lines that occurred late in the fourth quarter, and an additional 25 Marcellus and 10 Utica wells that were turned in line in the first quarter. Operating cost on a per Mcf basis also improved 22% in the quarter compared to the same period last year and held relatively flat sequentially. Costs would have improved further sequentially. But due to reduced completion activity, some of the water handling costs previously being capitalized are now being expensed which increased our OpEx by $0.02 per Mcf. Also, there were some unusual items such as wellhead maintenance costs and true-ups of jibs (22

[Tyler Lewis:]

Thanks, Tim. This concludes our prepared remarks. John, if you could please open the line up for questions at this time.

[Operator:]

Certainly. And first in line, we have a Holly Stewart with Scotia Howard Weil. Please go ahead.

[Holly Barrett Stewart:]

Good morning, gentlemen. First question, Dave, you were talking pretty fast. Just to clarify on the volume guidance, you said potentially the lower end of the guidance range, if you stayed at that low end of CapEx, meaning no new rig activity, correct?

[David Michael Khani:]

No. What I said was we pushed off basically two pads and so our capital could come at the lower end. We did not change our production guidance.

[Holly Barrett Stewart:]

Okay, okay. Thank you for the clarification. And then there was a mention either within the slide deck or the press release on improvement in takeaway infrastructure. I was just wondering if you could give some more color there and maybe help us understand what's the latest on the Nexus project?

[Nicholas J. DeIuliis:]

Well, we look at – Holly, the takeaway infrastructure as a whole, we look at the projects coming in the next couple of years, there's a total of about 22.5 Bcf worth of projects out there. And we have gone through all those and risked them down based on timing, probability, cancelations, et cetera. And if you risk that down to about 50%, that takes you down to about 11.5 Bcf of capacity that will be coming on in the next couple of years, most of that coming on late 2017, 2018 timeframe. We expect to see about a 6.3 Bcf increase and supply across the basin over that period. So that leaves about a 5 Bcf surplus in capacity. But currently, with the 3 Bcf to 6 Bcf a day of oversupply, we think that'll balance out. And that really doesn't take into consideration any demand growth or constraint improvement projects that may take place over that time. So we think that the market's going to remain stressed given this current supply situation through – into 2017. And as pipeline projects come on, we think we'll start to see some relief. But that really kind of falls in line with our current hedging strategy.

[Timothy C. Dugan:]

Yeah. And Nexus, we believe the Nexus project is moving forward. We feel very good about it.

[Holly Barrett Stewart:]

Okay. Great, gentlemen. Thank you.

[Operator:]

Our next question is from Neal Dingmann with SunTrust. Please go ahead.

[Neal D. Dingmann:]

Good morning, guys. Say, just more about – I know no plans yet for the drilling rigs yet at least at this time. But just you guys as a start, Tim, for you or Nick for the guys, you've obviously had great success up by that Gaut well, that one Utica well you pumped up there (33

[Timothy C. Dugan:]

Well, I think with the results we're seeing and they continue to improve up there, so that is an area that we're certainly excited about and would expect there certainly will be more activity up there. When we look at rigs returning, obviously, in the Utica we're looking at Monroe County and then the area of Brown to Gaut. There's some additional complexity down in Southwest PA that we're still working through. We've collected a lot of data there. We're just as excited about Southwest PA down in Greene County. But with the geology being a little less complex in the Gaut area and Monroe County, those would be the areas that we would return to first.

[Nicholas J. DeIuliis:]

And, Neal, on the – so that's the where and the question about when. It really goes back to our philosophy of wanting to grow NAV per share and being good capital allocators of the operating cash flow of the company. So, when you look at the drivers, you start doing the math behind those decisions, we're looking at the rate of returns in the NAV of the where that Tim just laid out of dry Utica and a lot of the drivers of that have gotten better. So NYMEX forwards are up. Now we talked about basis and how we view basis shrinking over the next year to 18 months. Our capital intensity, as Tim and Dave talked about, that's declining. Our unit costs are dropping, and dry Utica geologically looks better and better. So the drivers of that are putting us in a position where the math, the rate of return and NAV is looking better for the when decision. But we've also got the benefit of time right now. Our cycle time is being reduced to the extent that they have, that Tim's team has been able to achieve, really gives us the luxury of seeing what the forwards do, what the data from places like the Gaut and Monroe County, Ohio come in at with extended data periods, and we think we don't have to make a decision on another rig or increased activity set to impact 2017 production till another three months to six months. So we want to take the benefit of that time that we have afforded ourselves because of the compressed cycle times and get a little more accuracy and certainty on some of these drivers of rate of returns and NAV.

[Neal D. Dingmann:]

Great detail, Nick. And then just last one. I'm just curious, I saw in the press release you guys talked about these tests and these plugless completions. Tim, just anything you can say about either that or some other efficiencies, but potentially continue to improve the performance of the price.

[Timothy C. Dugan:]

Well, I think we've got – we've done a lot of work offline since we've drilled these first couple wells looking at what other operators have done, and we think that we're very confident that the potential is there to get the costs down quickly, down below that $20 million mark very quickly. And we expect that the next couple of wells we'll be in the sub $15 million range. A lot of it – and when you talk about where we go next, going back to the Gaut, with it being a little less complex, that lends itself to getting our costs down quicker as well. So we've gone back and really done a review of each of the seven wells that have been drilled and where we can improve and what we can do. Everything from bit selection to fluid systems, how we're completing them. We think all that just – it falls in line which is going to help us bring our costs down pretty quickly.

[Neal D. Dingmann:]

Great. Thanks for all the details, guys.

[Operator:]

Now to go to Lucas Pipes with FBR. Please go ahead.

[Lucas N. Pipes:]

Hey. Good morning, everybody, and good job again. Quick question just on 2017. Obviously, there's still a lot of variables that go into production next year. But I wondered if you could give us a flavor, kind of what range we could be looking at depending on the decision to – if you decide to drill later this year. Now what is the potential range of outcomes when it comes to 2017 production, maybe just some parameters for us to think about? Thank you.

[David Michael Khani:]

Yeah. So I don't – we won't give you a percentage range, but I'll just tell you the parameters. We're still sitting with a large amount of DUCs, some – majority of them are wet, so a function will be what is the – what does wet pricing look like relative to dry. Nick mentioned that in the next few months, we'll have a determination of do we actually bring rig activity back in second half of this year. We have debottlenecking projects and we have a lot of constrained production. Tim mentioned there's over 100 wells with a lot of constrained production. And so do we have debottlenecking projects as well. So the range of outcomes is really going to be a function of all those things, and with the near-term probably being – do we bring a rig back sooner than later.

[Lucas N. Pipes:]

Got it. Thank you. And then good job on the Buchanan sale, and thank you also for the additional details on that this morning. Now, when it comes to future asset sales, do you have processes running right now? And if so, any specific asset package that you would highlight that you're maybe more active in right now, and maybe also even timing in terms of where we could maybe see more activity?

[David Michael Khani:]

Yeah. Lucas, we actually always have asset sale processes going on. It's just part of our normal course of business. As we mentioned before, just to put it in context, we had 30 processes going on. We completed about six of them including with the Buchanan met sale, so we do have processes going on. We will not comment on any specifics because, as you know, Lucas, sometimes we pull the trigger and sometimes we don't, and even the ones that we don't, we sometimes we learn from the process and we bring them back out at some point in the future, so...

[Lucas N. Pipes:]

Great. Well, good luck with everything and I'll jump back in the queue. Thank you.

[David Michael Khani:]

Thanks, Lucas.

[Operator:]

Our next question is from Jeffrey Campbell of Tuohy Brothers. Please go ahead.

[Jeffrey L. Campbell:]

Good morning and congratulations on the quarter. First question I wanted to ask was regarding CONSOL's strategy to transition to an independent E&P company. Does that ultimately – will you continue to hold on to CNXC LP units as a fully independent E&P?

[Nicholas J. DeIuliis:]

Over time, our strategy looks at CNXC as a vehicle where the remaining 80% interest that we have in the Pennsylvania mining complex will ultimately reside. When that happens, how that happens, what happens with our LP units over time, those are all subject to the individual conditions as things unfold. So, ultimately, long-term, I think, the way to think about it is 98% of the Bailey complex of the Pennsylvania mining operations ends up in CNXC, what happens to the GP at 2%? Again, to be determined but the work to get from where we're at now to that endpoint is all going to be subjected to what we see with windows opening and all the variables that drive those.

[David Michael Khani:]

Yeah. And I'd just say the float will probably get bigger and a minimum probably – or a percentage ownership will come down just as you naturally drop in the asset and they need some sort of financing over time. But as far as us selling LP units right now, we have no determination that we would sell anything today.

[Jeffrey L. Campbell:]

Thanks. That was very helpful. I was just wondering if you could elaborate a little bit on the plugless completions that you cited as significantly reducing well completion times? And also do you have any other experiments ongoing like maybe diversion fluids or other tech that's interesting to know about?

[David Michael Khani:]

Yes. The plugless completions we've tested and we think that's probably the next big step in the reduction of our operational cycle times. A typical well now, when you look at a six-well pad, we spend 30-plus days drilling plugs on those six wells in running tubing. With the plugless completions, we – it's basically just – it's a combination of our hybrid cleanouts that we have done. So we're running in and making a cleanout run with our production tubing. We pumped the bed off in the bottom and we hang our tubing off. So it's essentially a day to a day-and-a-half per well, so we're saving several days per well. And so we're – we think that that has a lot of potential. And then we've also tested diversion fluids. We just did a well here recently where we tested plugless completions using diversion fluids to avoid plugs at all, and that certainly helps with the volume of fluid you pump and minimizing flush volumes and making sure you don't overflush each stage. So we're looking at other technologies but the plugless completions are probably one of the biggest things we're looking at now that's going to be a real savings from a time standpoint and cost.

[Jeffrey L. Campbell:]

Thanks for the color. I appreciate it.

[Operator:]

And we'll go to Michael Dudas with Sterne Agee. Please go ahead.

[Michael S. Dudas:]

Good morning, gentlemen.

[Nicholas J. DeIuliis:]

Good morning.

[Michael S. Dudas:]

First question is, maybe for Nick or Tim, appreciate your discussion about firm transportation capacity and the outlook there. What about ethane crackers and other opportunities to utilize some of that capacity? Is there anything you're seeing in the market that could be a little bit more positive thinking that with get some plants (43

[Nicholas J. DeIuliis:]

Up in this region, the topic of an ethane cracker and if it's going to be built, when it's going to be built, where it's going to be built, it's been all the rage over the past probably three years to four years. It's been that long actually.

[Michael S. Dudas:]

I know.

[Nicholas J. DeIuliis:]

And we've always known that, that's sort of the last and in some ways most meaningful leg of the demand story of natural gas, the Marcellus and Utica where you start to see that manufacturing renaissance where the demand centers for natural gas are built now right on top of the fields themselves. So it's very important but recognizing is longer-term. When you look at when this talk started and the potential for this began and where we're at today, I think there's a couple big questions that were looming four years ago that have been definitively answered. One was just the geological question of can we extract ethane in significant quantities on a reliable basis, a low cost basis, to justify the expenditure investment for a cracker facility itself. I think the industry has resoundingly answered that question in the affirmative which gives I think more confidence and derisk a big investment decision for the entities that would build and own the cracker facility. And then the next question comes down to just to the timing of the decision itself. And when you look at the supply projections that we see within those reasonable bands of different sets of assumptions, our view is the one to two cracker facilities are justified within this region. Now where they are? Are they in Western Pennsylvania or Eastern Ohio or North or West Virginia? When did they get actual construction started up and running? Those are things that require a crystal ball much more accurate than ours. But the stories there, the stories have gotten better because of the, sort of, uncertainty around supply and surety of ethane being addressed. And now it's just a question of many to those one to two projects.

[Michael S. Dudas:]

Agreed.

[David Michael Khani:]

There's a – there are four big crackers coming online next year down to the Gulf Coast. So we are starting to see the build out actually curve.

[Michael S. Dudas:]

That is correct, Dave, and should be more to come coming forward. My second question would be I'm – with the terrific job you've done on your cost in your business, I'm sure vendors have been supportive of that in the sense that there's been probably pretty good discussions relative to your pricing and such. How does that look today? And if things work out with many of your variables to bring rigs on until you get more aggressive on the drilling and the volume and such, do you think the capital – pretty much (46

[David Michael Khani:]

Well, I think there's two parts of our cost reductions. There's the organic reductions and then there's certainly some that were driven or aided by current market conditions and that certainly helped get our vendor cost down. But the vendor – the drops in vendor costs are not all tied to current market, and a lot of it's tied to the work our supply chain group has done in working with vendors, finding better ways to do things and make our cost structure more efficient. So we think we'll be able to maintain most of the cost savings that we have. Certainly, there will be some movement upwards when the industry – when commodity prices move back up. But we think the impact of that will be relatively small compared to the overall cost savings we've been able to identify and take advantage of.

[Nicholas J. DeIuliis:]

When you look at all the inroads we've made on efficiencies and costs, whether it's E&P team, corporate team, what the CNXC group has done over the Pennsylvania mining complex side, the majority of those gains and efficiencies are things that fundamentally have been a result of changes in the way we approach our business. And those are the types of things that our view is we grab onto and hold onto no matter what the commodity does. They stick. They stay with you. So that's a big area of attention that we're thinking through in getting that even though you're in a depressed commodity trough in the market right now, we realize that that's going to change. And when it changes, the biggest part of this story is we hold onto all these gains that we just secured and we don't lose them as has often been the case in the cycles of the commodities that we produce and operate within.

[Michael S. Dudas:]

Yeah. No doubt the numbers are showing that up in your favor definitely, Nick. I appreciate your comment. Thank you.

[Operator:]

And that will conclude the question-and-answer session. I'll turn it back to the company for any closing remarks.

[Nicholas J. DeIuliis:]

Thanks, John, and thank you everyone for joining us this morning. We appreciate your interest in CONSOL Energy and look forward to speaking with you again next quarter. Thank you.

[Operator:]

Ladies and gentlemen, that does conclude your conference. Thank you for your participation. You may now disconnect.